JOB ORDER COSTING

Exercise 1
During the first year of operations, Shapiro Tool accumulated the following manufacturing costs:

Raw materials, on account $ 8,000

Factory labor accrued 6,000
Raw materials paid cash 87,000
Factory labor paid 44,000

Prepare separate journal entries for each manufacturing cost.

Exercise 2
Hernandez, Inc. pays its employees $12 per hour. It allocates overhead at $3 per direct labor hour. Job R45
required 2.5 yards of direct materials at a cost of $5 per yard and took employees 45 minutes to complete. How
much is the total cost of Job R45?

Exercise 3
In January, Halrlan, Inc. production supervisor requisitioned raw materials for production as follows: Job 1 $600,
Job 2 $900, Job 3 $300, and general factory use, $520. Prepare a summary journal entry to record raw materials
used.

Exercise 4
Builder Bug Company allocates overhead at $9 per direct labor hour. Job A45 required 5 boxes of direct materials
at a cost of $30 per box and took employees 12 hours to complete. Employees earn $15 per hour. How much is
the total cost of Job A45?

Exercise 5
A selected list of accounts used by Hops Manufacturing Company follows:
Code
C Cash
AR Accounts Receivable
RM Raw Materials Inventory
WIP Work In Process Inventory
FG Finished Goods Inventory
AP Accounts Payable
FL Factory Labor
MOH Manufacturing Overhead
CGS Cost of Goods Sold
S Sales

Hops Manufacturing Company uses a job order system and maintains perpetual inventory records.

Instructions:
Place the appropriate code letter in the columns indicating the appropriate account(s) to be debited and credited
for the transactions listed below.
———————————————————————————————————————————
Account(s) Account(s)
Transactions Debited Credited
———————————————————————————————————————————
1. Raw materials were purchased on account.
———————————————————————————————————————————
2. Issued a check to Estes Machine Shop for
repair work on factory equipment.
———————————————————————————————————————————
3. Direct materials were requisitioned for Job 280.
———————————————————————————————————————————
4. Factory labor was paid as incurred.
———————————————————————————————————————————
5. Recognized direct labor and indirect labor used.
———————————————————————————————————————————
6. The production department requisitioned indirect
 materials for use in the factory.
———————————————————————————————————————————
7. Overhead was applied to production based on a
predetermined overhead rate of $8 per labor hour.
———————————————————————————————————————————
8. Goods that were completed were transferred to
finished goods.
———————————————————————————————————————————
9. Goods costing $80,000 were sold for $105,000
on account.
———————————————————————————————————————————
10. Paid for raw materials purchased previously
on account.
———————————————————————————————————————————

Exercise 6
Malone, Inc. uses a job order cost accounting system and keeps perpetual inventory records. Prepare journal
entries to record the following transactions during the month of July.

July 2 Purchased raw materials for $18,000 on account

9 Raw materials requisitioned by production:
Direct materials $14,000
Indirect materials 2,000
14 Paid factory utilities, $2,300 and repairs for factory equipment, $4,000
21 Incurred $45,000 of factory labor
26 Time tickets indicated the following:
Direct Labor (3,000 hrs × $12 per hr) = $36,000
Indirect Labor (1,000 hrs × $9 per hr) = 9,000
$45,000
28 Applied manufacturing overhead to production based on a predetermined overhead rate of $6 per
direct labor hour worked
28 Goods costing $56,000 were completed and transferred to finished goods
30 Goods costing $50,000 were sold for $80,000 on account

Exercise 7
Selected accounts of Gertt Manufacturing Company at year end appear below:

RAW MATERIALS INVENTORY WORK IN PROCESS INVENTORY

(a) 30,000 (d) 26,000 (d) 26,000 (g) 90,000
(e) 50,000
(f) 27,000
FINISHED GOODS INVENTORY COST OF GOODS SOLD
(g) 90,000 (h) 80,000 (h) 80,000

FACTORY LABOR MANUFACTURING OVERHEAD

(b) 66,000 (e) 66,000 (c) 12,000 (f) 27,000
(e) 16,000

Instructions:
Explain the probable transaction that took place for each of the items identified by letters in the accounts. For
example:

Exercise 8
The gross earnings of factory workers for Detox Company during the month of March are $80,000. The
employer's payroll taxes for the factory payroll are $7,000. Of the total accumulated cost of factory labor, 80% is
related to direct labor and 20% is attributable to indirect labor.

Instructions:
A. Prepare the entry to record the factory labor costs for the month of March.
B. Prepare the entry to assign factory labor to production.
C. Prepare the entry to assign manufacturing overhead to production, assuming the predetermined overhead
rate is 120% of direct labor cost.

Exercise 9
Busch Manufacturing uses a job order cost accounting system. On April 1, the company has Work in Process
Inventory of $12,000 with two jobs in process: Job No. 323, $7,000, and Job No. 324, $5,000. During April, a
summary of source documents reveals the following:

Materials Requisition Slips Labor Time Tickets

Job No. 323 $ 1,200 $ 2,000
324 1,700 3,700
325 7,500 3,000
326 2,400 1,800
General use 900 1,200
Totals $13,700 $11,700

Busch applies manufacturing overhead to jobs at an overhead rate of 50% of direct labor cost. Job No. 323 is
complete at the end of April. Job 324 is sold.

Instructions:
A. Prepare summary journal entries to record the raw materials requisitioned, factory labor used, the
assignment of manufacturing overhead to jobs, and the completion of any jobs.
B. Calculate the balance of the Work in Process Inventory account at April 30.

Exercise 10
Lerry Corporation had the following transactions during its first month of operations:
1. Purchased raw materials on account, $96,000.
2. Raw materials of $32,000 were requisitioned to the factory. An analysis of the materials requisition slips
indicated that $4,000 was classified as indirect materials.
3. Factory labor costs incurred were $61,000 of which $55,000 pertained to factory wages payable and $6,000
pertained to employer payroll taxes payable.
4. Time tickets indicated that $57,000 was direct labor and $4,000 was indirect labor.
5. Overhead costs incurred on account were $68,000.
6. Manufacturing overhead was applied at the rate of 120% of direct labor cost.
7. Goods costing $34,000 are still incomplete at the end of the month; the other goods were completed and
transferred to finished goods.
8. Finished goods costing $71,000 to manufacture were sold on account for $136,000.

Instructions:
Journalize the above transactions for Lerry Corporation.

Exercise 11
Hooper Manufacturing Company employs a job order cost accounting system and keeps perpetual inventory
records. The following transactions occurred in the first month of operations:
1. Direct materials requisitioned during the month:
Job 56 $12,000
Job 57 6,000
Job 58 14,000
$32,000
2. Direct labor incurred and charged to jobs during the month was:
Job 56 $20,000
Job 57 16,000
Job 58 10,000
$46,000
3. Manufacturing overhead was applied to jobs worked on using a predetermined overhead rate based on 80%
of direct labor costs.
4. Actual manufacturing overhead costs incurred during the month amounted to $39,000.
5. Job 56 consisting of 2,000 units and Job 58 consisting of 400 units were completed during the month.
Instructions:
A. Prepare journal entries to record the above transactions.
B. Answer the following:
1. How much manufacturing overhead was applied to Job 58 during the month?
2. Compute the unit cost of Jobs 56 and 58.
3. What is the balance in Work in Process Inventory at the end of the month?
4. Determine if manufacturing overhead was under- or overapplied during the month. How much?

Exercise 12
The following inventory information is available for Hoobastank Enterprises for the year ended December 31,
2006:

Inventories Beginning Ending

Raw materials $11,000 $ 8,000
Work in process 24,000 21,000
Finished goods 12,000 11,000
Total $47,000 $40,000

In addition, the following transactions occurred in 2006:

1. Raw materials purchased on account, $135,000.
2. Incurred factory direct labor, $52,000, all except $2,000 is paid.
3. Incurred the following overhead costs during the year: Utilities $1,800, Depreciation on manufacturing
machinery $12,000, Manufacturing machinery repairs $1,200, Factory insurance $4,300
4. Assigned $51,000 of direct factory labor to jobs.
5. Incurred $1,000 of indirect labor.
6. Applied $20,500 of overhead to jobs.

Instructions:
A. Create T-accounts for the manufacturing costs and inventories and post the transactions to the accounts.
B. From an analysis of the accounts, compute the following:
1. Raw materials used.
2. Completed jobs transferred to finished goods.
3. Cost of goods sold.
4. Under- or overapplied overhead.

Exercise 13
Job cost sheets for Holdly Manufacturing are as follows:

Job No 218 Quantity 1000

Date Direct Materials Direct Labor Manufacturing Overhead
June 4 4,000 3,000 1,500
9 3,500 2,300 1,150
14 5,400 2,700
28 1,000 2,100 1,050

Job No 220 Quantity 600

Date Direct Materials Direct Labor Manufacturing Overhead
June 8 3,000 1,000 500
12 1,600 800
16 2,500 3,600 1,800
29 1,500 700 350

Instructions:
1. What is the balance in Work in Process Inventory on June 30 if these were the only unfinished jobs?
2. What is the predetermined overhead rate in June if overhead was applied on the basis of direct labor cost?
3. Assuming Job 218 is complete, what is the total and unit cost of the job?
4. Assuming Job 220 is the only unfinished job at June 30, what is the balance in Work in Process Inventory
on this date?

Exercise 14
Stadium Company begins operations on July 1, 2006. Information from job cost sheets shows the following:

Manufacturing Costs Assigned

Job No. July August September
A21 $13,000 $4,100
A22 6,100 4,700 $9,000
A23 4,900
A24 2,600 3,000
A25 2,400 4,200

Job A23 was completed in July. Job A21 was completed in August, and Jobs A22 and A25 were completed in
September. Each job was sold for 40% above its cost in the month following completion.

Instructions:
A. Compute the balance in Work in Process Inventory at the end of July.
B. Compute the balance in Finished Goods Inventory at the end of August.
C. Compute the gross profit for September.

Exercise 15
Slower Company uses a job order cost system in each of its two manufacturing departments. Manufacturing
overhead is applied to jobs on the basis of direct labor cost in Department A and machine hours in Department
B.

In establishing the predetermined overhead rates for 2006, the following estimates were made for the year:
Department
A B
Manufacturing overhead $1,056,000 $840,000
Direct labor cost 264,000 600,000
Direct labor hours 12,000 40,000
Machine hours 75,000 84,000

During January, the job cost sheet showed the following costs and production data:
Jobs
14 15
Direct materials used $34,000 $31,000
Direct labor cost 24,000 25,500
Manufacturing overhead incurred 65,000 35,000
Direct labor hours 2,000 1,700
Machine hours 5,000 4,000

Instructions:
A. Compute the predetermined overhead rate for each department.
B. Compute the total manufacturing cost assigned to jobs 14 and 15 in January.

Exercise 16
Welleslay Company begins the month of March with $17,000 of work in process costs from job 324. Information
from job cost sheets shows the following additional costs assigned during March, April, and May of 2006:

Manufacturing Costs Assigned

Job No. March April May
324 $26,000
325 18,000 $23,000 $18,000
326 41,000 11,000
327 16,000 31,000
328 24,000 41,000
Job 324 was completed in March. Jobs 325 and 327 were completed in May, and Job 326 was completed in
April. Jobs are sold during the month after completion. Total revenue for jobs sold during the 3 month period is
$145,000.

Instructions:
Calculate the cost of the work in process and finished goods inventory accounts at the end of May.

Exercise 17

Twizzle Manufacturing is a small manufacturer that uses machine-hours as its activity base for assigned
overhead costs to jobs. The company estimated the following amounts for 2006 for the company and for Job 62:

Company Job 62
Direct materials $60,000 $4,000
Direct labor $25,000 2,500
Manufacturing overhead costs $72,000
Machine hours 90,000 mh 1,350 mh

During 2006, the actual machine-hours totaled 94,000, and actual overhead costs were $71,000.

A. How much is the predetermined overhead rate?

B. How much are total manufacturing costs of job 62?
C. How much overhead is over or underapplied for the year for the company? State amount and whether
over or under.
D. If Twizzle Manufacturing sells job 62 for $16,000, how much is gross profit?